3VR Firesale to Identiv

Published Feb 07, 2018 14:42 PM
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A decade ago, 3VR raised more than $60 million to deliver facial surveillance and video analytics in a '3rd generation' video recorder.

Now, 3VR has been sold to Identiv for ~90% less than what 3VR raised.

What went wrong? What can go right for Identiv making this acquisition?

Identiv Overview

Identiv is a publicly traded company with a market valuation of just ~$55 million. However, they secured an investment of up to $20 million in December 2017.

Identiv's revenue is ~$60 million with minimal to no profits.

Identiv is best known for its physical access control, specifically Hirsch.

Deal Overview - $6.9 Million Price, ~$12 Million Annual Sales

Indentiv is paying a quite low 0.6x prices to sales revenue for 3VR (compare to Avigilon at 2.5x sales multiple).

3VR's estimated 2018 revenues will be $12 million, based on Identiv's projection of $10- $11 million for the rest of 2018. In past years, 3VR has claimed revenue up to ~$25 million. 3VR's gross margins are in the 60% range, according to Identiv. The margins are relatively quite good but the revenue is quite poor. 3VR has not historically been profitable, according to Identiv, and they expect "mid-term target non-GAAP adjusted EBITDA margin of approximately 10% post synergies" which is still quite low.

More details on the Identiv investor's call, also cited within this post.

Consolidating Offices and Booths

Identiv will consolidate 3VR offices and trade show booths. Identiv cited how 3VR was spending $20,000 per person for rent (San Francisco is expensive). By contrast, Identiv's HQ is in lower cost, though nearby, Fremont.

3VR Challenges

3VR bet on facial recognition and video analytics. They failed. They certainly were not alone - Cernium, Object Video, Vidient, etc., many companies reached similar ends. Even VideoIQ, which did the best, sold for a modest $32 million (though clearly spectacularly better than 3VR).

3VR's analytics simply were not accurate enough to meet customer's demands. That left 3VR as being an expensive recorder with some differentiated search features which were not enough to justify the cost premium and their feature limitations compared to recorder focused competitors like Exacq, Genetec and Milestone.

Gave Up Years Ago

The reality is that 3VR essentially gave up years ago. While the VC funding poured in during the 2000s, by 2013 3VR had little left, significantly scaled back operations and engineering, raised some debt and struggled for the past 5 years.

The product is largely the same as it was 5 or even 10 years ago.

Fit With Identiv Potentially Good

On the positive side, Identiv paid very little for 3VR. Identiv's CEO amusingly emphasized on the investor's call that they are leveraging over $60 million in VC funding... for less than $7 million. There is not much money at risk plus given their geographic closeness, integration should be easier.

Moreover, they do operate a complimentary access control business, did not have their own recorder offering, and can plug 3VR into their sales organization.

With some investment into 3VR's software development, 3VR has some potential. Analytics and facial recognition are definitely on the upswing now, certainly at least in terms of interest. And 3VR's platform is developed from the ground up to ingest, manage and display analytics generated results, not common with traditional VMS offerings. So if Identiv is willing and able to modernize 3VR, it could be well worth the small investment they made.

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